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More SE Asia companies consider US IPOs, filling void left by China peers

More SE Asia companies consider US IPOs, filling void left by China peers

SINGAPORE/SYDNEY — Several Southeast Asian companies are considering listing in the United States, banking on strong investor appetite for emerging market growth in the absence of Chinese stock offerings.

Senior executives in leading SME digital financing platform Funding Societies, Singapore-based entertainment firm Gushcloud International and Thai insurance technology firm Sunday told Reuters they were looking into New York as one of their initial public offering (IPO) venues.

This comes on top of recently announced plans by Vietnamese internet company VNG Corp and Philippine real estate company DoubleDragon Corp’s Hotel101 Global to list in the US, filling a void left by Chinese companies which hit the pause button on US IPOs after political tensions with Washington intensified, Beijing tightened scrutiny of domestic firms seeking overseas listings and China’s own economy slowed.

“China’s shadow into the ASEAN region has shrunk since the world reopened after the pandemic,” said Leif Schneider, senior legal adviser at law firm DFDL Vietnam.

“Chinese competitors have gradually been pushed to the sidelines due to homemade restrictions and the ensuing domestic economic fallout,” he added. “These factors have enabled some of their ASEAN rivals to step out into the spotlight.”

ASEAN, the 10-member Association of Southeast Asian Nations, includes Thailand, Singapore, Malaysia and Vietnam. The bloc’s biggest car e-commerce platform Carsome Group has also said it was considering various global exchanges, including those in the US, for a potential listing.

Southeast Asian firms have raised about $101 million via IPOs in the US so far this year, way below last year’s $919 million, but bankers expect the pace to pick up over the next 12 months as companies hunt for new sources of capital after relying on private funds for the last few years.

In contrast, Chinese firms have raised $463.7 million via USlistings so far this year, slightly above 2022 levels but a fraction of the $12.96 billion and $12.48 billion raised in 2021 and 2020 respectively, according to LSEG data.

For investors seeking emerging market exposure, Southeast Asia fits the bill, because of the region’s strong economic growth and increasing population, analysts say.

For example, growth in Indonesia, Southeast Asia’s biggest economy, accelerated at its highest rate in three quarters in the latest April-June period, boosted by strong household and government spending, data showed.

Some Southeast Asia companies seeking listings in the US look to raise between $300 million and $1 billion, with valuations ranging from $1.5 billion to $8 billion, bankers said, without naming any firms.

The plans by Southeast Asian firms to list in the US should also cheer Wall Street banks in Asia, who generate about a third of their revenues from equity capital market (ECM) deals which all but dried up with Chinese IPOs.

“For some of the US investors who were focused on emerging markets, their tech exposure largely came from Chinese companies because they were the biggest names listed in the US,” said Sunil Khaitan, Bank of America’s ECM head for Southeast Asia. “With the current cautious stance around China, these investors are on the lookout for some of the other emerging markets names,” he added.

For companies, the US offers several advantages.

Funding Societies’ co-founder and group CEO Kelvin Teo told Reuters the US was one of the company’s preferred options because of it would provide a deep pool of capital and global investor base.

Andrew Lim, Gushcloud’s chief financial officer, also said a US listing would expose the company to “investor familiarity with fast growing new economy companies”.

Companies in sectors including logistics, technology, mining, electric vehicles and renewable energy are most likely to seek IPOs both locally and abroad, said Deloitte Southeast Asia Disruptive Events Advisory Leader Tay Hwee Ling.

“International investors are seeing the value of portfolio diversification that Southeast Asia provides,” Tay added.

The expected pickup in Southeast Asian listings, however, could get derailed by share volatility and stringent investor scrutiny, analysts say.

Shares of Vietnamese electric vehicle maker VinFast have jumped some 75% since its debut in August, but not without strong volatility in thin trade.

Most US investors, however, are savvy enough when it comes to due diligence.

“US investors are generally proficient and experienced in evaluating opportunities across different sectors, but it is usually helpful for Southeast Asia companies to educate investors on any country specific factors that may affect their business,” said Art Anuruk Karoonyavanich, head of capital markets at DBS based in Singapore. — Reuters

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SEC clarifies required comparative periods for companies filing their registration statements

COMPANIES registering their shares with the Securities and Exchange Commission (SEC) are required to submit two comparative periods for the past three fiscal years to show changes in their financial condition, the regulator said.

The commission issued the clarification amid mixed interpretations of a specific provision under the Securities Regulations Code (SRC).

In Memorandum Circular No. 13 signed by SEC Chairperson Emilio B. Aquino on Sept. 12, the securities regulator clarified Part III, paragraph A, subparagraph 2 (a) of Annex C of the SRC regarding the comparative periods required in the management’s discussion and analysis in a company’s prospectus. 

Annex C of Rule 12 contains details for the non-financial disclosure requirements in the registration statements that should be filed with the SEC.

The circular clarified that a registrant should provide the following disclosure comprising two comparative periods for the last three fiscal years in the management’s discussion and analysis portion of its prospectus.

“The foregoing portion of Annex C gave rise to conflicting views and varying interpretations as to the number of fiscal years required to be disclosed in the management’s discussion and analysis portion of the prospectus,” the circular said.

The SEC’s markets and securities regulation department sought guidance from the commission en banc on the interpretation of the phrase “for each of the last three fiscal years” as provided in Annex C, which was subsequently clarified during an en banc meeting on Sept. 5.

According to the circular, the interpretation will apply prospectively to registrants required to file registration statements and other reportorial documents, which include disclosure of a management’s discussion and analysis.

Sought for further comment, SEC Commissioner Kelvin Lester K. Lee said the circular aims to allow easier ways to raise capital. 

“The rationale is to make it easier to file registration statements and as a result make it easier to raise capital.  This covers registration statements and/or other reportorial documents, which include a disclosure of a management’s discussion and analysis,” Mr. Lee told BusinessWorld in a Viber message.

“This is for those that intend to file registration statements,” he added.

The SEC said the interpretation under the circular would take effect 15 days from its publication. — Revin Mikhael D. Ochave

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Marcos secures $22M in investment pledges from Indonesian companies

Marcos secures $22M in investment pledges from Indonesian companies

PHILIPPINE President Ferdinand R. Marcos, Jr. secured $22 million (P1.3 billion) in investment pledges from Indonesian companies in the animal health, artificial intelligence (AI) and digital sectors, according to the Presidential Palace.

Mr. Marcos met with top executives of Indonesian companies on the sidelines of the Association of Southeast Asian Nations (ASEAN) Summit in Jakarta.

In a statement, the Palace said PT Vaksindo Satwa Nusantara is planning to invest $2 million as it works with Univet Nutrition and Animal Healthcare Company Philippines (UNAHCO, Inc.) on veterinary vaccines. The company, known as Indonesia’s first animal vaccine maker, is expected to provide the Philippines with an avian influenza vaccine.

Mr. Marcos also met with executives of PT WIR Asia Tbk, described as the first metaverse company in Indonesia. WIR’s subsidiary PT Mata Nilai Republik is planning to invest $20 million in the Philippines in the next five years.

The President also met with executives of satellite company Pasifik Satelit Nusantara (PSN). PSN last year signed a memorandum of understanding (MOU) with WIT Philippines, Inc., which would involve the launch of a satellite by December that would help improve digital connectivity in the country.

Mr. Marcos’ business meetings were led by the Department of Trade and Industry (DTI) through the Philippine Trade and Investment Center-Jakarta.

“The meetings were a follow-up to the President’s state visit to Indonesia, aimed to forge strategic linkages and partnerships between the Philippines and Indonesia in key sectors, such as agriculture, specifically animal vaccine manufacturing, digital technology, and innovation,” the DTI said in a statement.

Separately, the Palace said the Philippine private sector had signed a deal with its Southeast Asian counterparts to improve ties in agriculture and small business development, as the region seeks to promote economic integration.

The memorandum of understanding signed by members of the ASEAN-Business Advisory Council (BAC) aims to jointly conduct studies and mentorship opportunities for potential agriculture, agriculture technology, food security, agri-preneurship business models and value chain development among small, medium, and large farmers, enterprises, and government entities.

The development of trade and investment opportunities in various agricultural commodities including rubber, rice, corn, fruits, vegetables, and other agricultural services is expected under the joint cooperation, the DTI said.

Separate MOUs were signed for each cooperation with Thailand, Brunei, Singapore, Laos, Cambodia, Vietnam, Myanmar, and Indonesia through their respective ASEAN-BAC representatives.

The Philippines was represented by ASEAN-BAC Philippines Chairman Jose Ma. Concepcion III, a member of Mr. Marcos’ Private Sector Advisory Council.

“All member states also agreed to jointly promote effective strategies in addressing climate change and ensure a sustainable agribusiness environment,” the Palace said.

Speaking at the ASEAN-BAC roundtable dialogue, Mr. Marcos said the Philippines seeks to deepen economic ties with ASEAN countries through the Regional Comprehensive Economic Partnership (RCEP).

“It is a catalyst that is seen to bring in even more collaboration amongst ASEAN member states,” he said. “We are positive that RCEP will further deepen economic integration and significantly contribute to the economic growth of the region.”

RCEP, which covers nearly a third of the global population and about 30% of its global gross domestic product, took effect locally on June 2. Participating countries include the members of ASEAN, Australia, China, Japan, New Zealand, and South Korea.

The trade deal is heavily supported by China, whose trade with member countries, according to a May 2022 analysis from China Briefing, accounted for 30.4% of Beijing’s total foreign trade value.

Critics of RCEP have already warned that the trade deal would only make the Philippines heavily reliant on imports from China and prevent the Southeast Asian nation from pursuing trade diversification. — K.A.T. Atienza

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Pandemic, geopolitical risks force agro-food companies to innovate

Pandemic, geopolitical risks force agro-food companies to innovate

By Kyle Aristophere T. Atienza, Reporter

THE coronavirus pandemic exposed the world to unprecedented risks, affecting the agricultural sector and food security and prompting governments to impose protectionist policies.

But the global health crisis, which also showed the weakness of other industries in the face of supply chain disruptions, spurred companies in the agro-food sector to innovate.

“The supply chain disruptions caused by the COVID-19 (coronavirus disease 2019) pandemic created a number of responses by both companies and countries,” Christopher Ilagan, who heads the American Chamber of Commerce of the Philippines (AmCham) Agribusiness Committee, said in an e-mail.

“From a deep reliance on global trade flows, the shifts have come in various forms. There are those who have diversified supplier bases across borders and there are others who have sought to ‘near-shore’ or ‘friend-shore’ their supply chains.”

“The most extreme has been the reshoring or onshoring of supply chains, driven further by growing nationalism, protectionism and geopolitical tensions,” he added.

Cargill Philippines, Inc. was among the companies in the Philippines that adapted to the “changing marketplace conditions and operational and logistical challenges.”

“Our interconnectedness and experience from 75 years in the Philippines allowed us to deal with the challenges that arose as a result of the pandemic — we could tap local sourcing options to reduce dependency on international supply routes and satisfy demand in vulnerable communities,” it said in an e-mail.

During the pandemic, Cargill redirected poultry from restaurants in Asian countries like the Philippines to consumers, selling the equivalent of about 200,000 budget meals locally.

Cargill provides food and agricultural services and products such as grain, oilseed, commercial feeds and sweeteners.

“In response to the shifting demands, it was important to take an agile approach and adjust swiftly,” it said.

Cargill said it has been using digital solutions to efficiently analyze data, improve decision-making and optimize farm operations, “providing our partners a competitive advantage in the market.”

“With our expertise in precision nutrition, we can drive efficiencies and enable livestock farmers to do more with less,” it said. “We provide customized formulations that minimize waste while maximizing nutrient absorption and raw material utilization.”

The company has adopted new methods and technologies to become more competitive, including a cloud-based farm management platform called Agriness, which provides real-time data and insights to improve productivity, enhance animal well-being and increase profitability.

The company has also been using a poultry microbiome assessment tool called Galleon, which uses artificial intelligence (AI) and statistical analysis to help farmers assess the gut microbiome of their flock.

It has also adopted Panorama, a flexible scenario planning system that helps broiler producers make confident decisions about their operations for the best economic results; Neopigg, a young animal nutrition solution that gives piglets a good start to boost their performance throughout their life cycle; and Truvisor, a broiler breeder offering that helps improve laying performance, hatchability and chick quality.

“The global health crisis taught us the value of agility and we continue to maintain a contingency plan to address potential issues promptly,” Cargill said. “We continuously review and refine our business continuity strategies to better respond to future crises effectively.”

The same is true for Axelum Resources Corp., a Philippine manufacturer, exporter and retailer of globally in-demand consumer food essentials, including coconut products.

“The COVID-19 pandemic compelled us to innovate our ways without compromising productivity by embracing digitalization, streamlining our value chain and reinforcing contingency planning, in order to thrive in a renewed business landscape,” it said in an e-mail.

The company has capitalized on unprecedented opportunities to future-proof key areas of the business, “which will serve as our growth anchor in the long term.”

Axelum said it has continuously invested in cutting-edge technology to maximize scale and retain its competitive edge, citing its main production facility in Misamis Oriental in southern Philippines that features state-of-the–art equipment “attuned to world-class manufacturing and export standards.”

At the peak of community lockdowns, the company managed to fast-track its expansion programs, resulting in increased production capacity of up to 50%.

Mr. Ilagan of AmCham noted that in the food and agriculture space, there has been a growing focus on enhancing domestic food security with the help of emerging technologies, including precision agriculture, robotics and automation in the food manufacturing sector, artificial intelligence in digital applications and biotechnology to maximize yields/productivity for various crops and livestock species.

“This tech adoption trend is driven not only by the pressures of having to feed a growing and more prosperous nation, but also to react against those counter-productivity trends which have reduction impacts on productivity, such as climate change and human-induced air, water, soil and solid waste pollution,” he said.

Aside from the pandemic, geopolitical tensions and the ever-changing climate have also pushed food prices up, worsening food insecurity, according to McKinsey & Company.

It noted that Russia’s invasion of Ukraine, which is among the world’s six breadbasket regions, was “tilting global food security into a state of high risk.”

Recently, Russia withdrew from a deal that allowed Ukraine to export grain through the Black Sea, raising fears over global food supplies.

Cargill said it’s working to mitigate external risks by helping boost the local food system “to avoid disruptions.”

“We firmly believe that by addressing global challenges head on and adopting forward-thinking strategies, we can turn these challenges into opportunities for a sustainable, resilient and thriving future,” it said. “After all, our mission is fueled by our drive to keep innovating and fostering collaboration with our partners and stakeholders.”

The company said it has been rehabilitating 700 hectares of coconut farms damaged by Super Typhoon Odette, helping 1,000 coconut farmers. “This is being done through farmer-led propagation of seed nuts in community-based seedbeds and nurseries, farmer training in sustainable agriculture, provision of alternative livelihoods while waiting for the coconut trees to bear fruit, and establishment of farmer cooperatives for improved access to markets and corporate buyers.”

It has also been helping corn farmers and cooperatives to boost agricultural yields, improve farmer livelihood and contribute to the country’s food security.

“By integrating an inclusive business model and training on environmentally sound agricultural practices into the program, we aim to strengthen our commitment to support the local corn industry through full utilization of corn yields while creating an alternative corn supply for Cargill feed mills in the Philippines.”

The company said it’s also committed to implementing sustainable practices, noting that it plans to reduce global greenhouse gas emissions from its global supply chain by 30% by 2030.

Axelum, meanwhile, said it has instituted an evolving sustainability agenda to address or mitigate various climate and environmental risks.

“Our manufacturing operations make full use of the coconut, resulting in zero waste generated from raw materials,” it said. “We constantly modernize our equipment and infrastructure, while optimizing logistical activities to further reduce our direct carbon footprint.”

The companies hope the government will boost the country’s access to international markets through trade agreements and export incentives.

By doing so, “the government can reduce trade barriers and create more opportunities for Filipino agri-food products in the global marketplace,” Cargill said.

Export incentives would also harness the potential of the Philippine coconut industry on the global stage, Axelum said.

Mr. Ilagan said the government needs to simplify and harmonize regulations across the agro-food sector, strengthen the push toward consolidation of operations in the agriculture sector and broad adoption of new technologies, and popularize sustainable or regenerative agriculture.

“All these are important areas of reform that must be pursued to set the country up to weather these longer-term challenges around food security.”

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